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Harrison Street fund keeps buying, on track for $1B in first year

The Harrison Street Canada Alternative Real Estate Fund has invested in its seventh property, a 5...

IMAAGE: Harrison Street's Canada Alternative Real Estate Fund has acquired a 505 interest in the Pearl & Pine seniors living centre in Burlington. (Courtesy Harrison Street)

Harrison Street’s Canada Alternative Real Estate Fund has acquired a 50 per cent interest in the Pearl & Pine seniors living centre in Burlington. (Courtesy Harrison Street)

The Harrison Street Canada Alternative Real Estate Fund has invested in its seventh property, a 50 per cent stake in the 125-unit Pearl & Pine independent senior living community in Burlington, Ont.

By the end of this quarter, the fund will have executed on transactions with asset values worth approximately $730 million, Harrison Street managing director and head of Canadian transactions and business development Jonathan Turnbull told RENX. It’s on track to do close to $1 billion in its first year of operations in Canada, which was the objective.

Harrison Street purchased the stake in the Burlington facility for an undisclosed sum from third-party investors, while Reichmann Seniors Housing (RSH) retained its 50 per cent stake in the property. Signature Retirement Living, the operating arm of RSH, will continue to manage the property.

Harrison Street, RSH and Signature had entered a joint venture to build a 152-unit senior housing community at 412 Sparks St. in Ottawa last year. Construction is now above grade, on time and on budget, and the residence is scheduled to open in 2024.

That led to talks about the parties doing more together and the culmination of the Pearl & Pine deal.

Pearl & Pine “great opportunity”

“It was a great opportunity for us to buy into,” Turnbull explained. “I would say it’s one of the premier senior housing properties in the country, in a very affluent market.”

Pearl & Pine is centrally located in downtown Burlington, offering residents access to local restaurants, galleries, entertainment, shops, parks and hospitals.

Pearl & Pine’s amenities include a swimming pool, an exercise room, a Pilates and yoga studio, a hair salon, a theatre, a piano bar, a rooftop terrace, a bistro, dining rooms, retail shops and parking.

The property, built in 2014, is 93 per cent occupied. That’s well above the national seniors living property average, which Turnbull said was in the high-70 per cent range.

RSH and Signature are excellent operating partners and Harrison Street will likely expand this partnership, according to Turnbull.

“We love the Signature folks because they were able to do such an outstanding job during COVID, by working at a local level to ensure the safety of the tenants and working well with their families around the properties,” he said.

Senior housing is a growth area

Harrison Street bought four Ontario senior housing properties in partnership with Revera last fall: The Renoir in Newmarket; The Williamsburg in Burlington; Westney Gardens in Ajax; and Granite Landing in Cambridge.

Turnbull said the 80-plus population in Canada is expected to double over the next 15 years.

“High-quality seniors beds are required to support that growth. We see it as a long-term strategy. We’re believers in the seniors space in Canada and will continue to invest.

“We think there are great opportunities to buy established, high-quality product with great operators.”

Harrison Street’s history and growth

Harrison Street is an investment management firm founded in 2005 to focus exclusively on alternative real assets. It has invested across senior and student housing, healthcare delivery, life sciences and storage real estate, as well as social and utility infrastructure.

Harrison Street is headquartered in Chicago, with offices in London, Toronto, San Francisco and Washington, D.C. It has more than 200 employees, nearly $46 billion in assets under management and a global institutional investor base.

Harrison Street’s senior leadership team has an ownership stake in the firm, while Colliers has been a strategic partner and 75 per cent owner since July 2018. The two companies operate independently of each other.

The Toronto office opened last year and will grow from four to eight employees in mid-July. It will move a few blocks north from its current location at 1140 Bay St. to accommodate the growth.

Harrison Street’s deal pipeline

IMAGE: Jonathan Turnbull, managing director and head of Canadian transactions for Harrison Street. (Courtesy Harrison Street)

Jonathan Turnbull, managing director and head of Canadian transactions and business development for Harrison Street. (Courtesy Harrison Street)

Harrison Street has focused on off-market strategic deals with developers and operating partners since the firm itself is neither a developer nor an operator.

In addition to the aforementioned senior housing properties Harrison Street is involved with, last fall it also purchased 100 per cent of Aria, a new 288-unit student housing property in Calgary’s University District.

Harrison Street, over the next few weeks, expects to announce: more established, stabilized senior housing investments; a student housing deal in Ontario; and a medical office transaction in Calgary. The Calgary properties introduce geographic diversity to the portfolio.

“Out of the gate we’ve been heavily weighted to senior and student housing, but we’re now starting to diversify our portfolio into other segments that we want to invest in, starting on the medical office side of things,” said Turnbull.

“The long-term strategy is one-third senior, one-third student and one-third other, with other incorporating medical office, self-storage, life sciences and data centres.”

More cautious approach to development

The partners locked into a fixed-rate contract and were ahead of the construction cost uptick when the development of the Sparks Street senior housing project began last year.

Now, with rising construction costs and a more uncertain development environment, Turnbull said his firm sees better pricing and risk-reward benefits with established, quality assets that are stabilized with good quality partners.

“Our fund is a core-plus fund. Our investors are asking us to assess the risk profile and allocate capital where at least 65 per cent is in stabilized assets and 35 per cent can be value-add.

“We have to be prudent in allocating between them and, right now, we’re a little more over-weighted in our mindset in the near term as it relates to stabilized being a better risk-reward for our investors.”

That being said, and while Turnbull said it was too early to reveal details, Harrison Street plans to move forward with a new student housing project.

It will be in a market where Harrison Street has a sense of pricing control and a development partner that has done it before, on time and on budget, and has the wherewithal to do it again.

“We continue to grow and our objective is to continue to be a leader in the marketplace, despite market uncertainty, in making strategic and smart investments,” said Turnbull. “We have the capital backing and continue to raise capital on a monthly basis.

“A lot of institutional capital is realizing that alternative real estate is a good complement to the traditional real estate sectors. There’s a lower competitive marketplace in Canada in these sectors. We’re well-positioned and we continue to make deals.”

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